Most of us have seen a television commercial and thought: “If only I had that iPad, that new television set, or that big Jacuzzi, I’d be so much happier.” But Elizabeth Dunn and Michael Norton, authors of the new book "Happy Money,"aren’t so sure. When it comes to money—whether in the form of a bonus, a new car, or the latest gadget--they argue that more is not always better.

Is cash the only way for companies to keep their employees happy? Companies like Google have been experimenting with rewards that don’t involve money. One such reward is to allow employees to give away vacation days as gifts if,
say, a friend at the office has a family emergency. “I get one less day
in Maine, but it’s worth it for me because I’m helping you,” Norton
says.

Google has also rolled out a program in which employees can
nominate coworkers to receive a gift of $150 out of a rewards fund. To a
giant like Google, $150 is a drop in the bucket. But to an individual,
that amount—and, more specifically, the opportunity to feel appreciated
by one’s coworkers—makes a big difference.

Humans are naturally
very comparative, and money often serves as a metric because it’s so
easily countable. But, as companies like Google have begun to realize,
money doesn’t necessarily have to be what we use to make employees
happy. “The desire for status and recognition can come from all sorts of
sources,” Norton says.

“There are so many other ways we can make
people feel that they’re a little bit ahead of the other guy; we don’t
need to only use money to do it.”

Experiential money

According
to Norton and Dunn, the things that make us happy aren’t actually
things. When asked about the influence of past purchases on their
happiness, people consistently rank experiential purchases, like trips
with friends, over items like iPads, shoes, and televisions.

This
may seem counterintuitive, since the shoes will stay in your closet for
much longer than a vacation will last. Dunn argues, however, that the
human brain has a surprising way of making memories from experiences
seem better over time, which makes them less subject to regret than
material purchases. “My closet doesn’t make my clothes any nicer over
time, but my mind can make those memories better,” she says.

Take
cars, for example. The only time that having a nicer car actually seems
to improve the quality of your day, Dunn says, is when going out for a
joyride—in other words, pretty rarely. Otherwise, the things you spend
time thinking about on your daily commute have nothing to do with the
fancy features you admired on the car when it was still in the lot.

“When
you buy a very nice car versus an average car, either way, you have to
shovel it out when it snows,” Norton points out. Whether your car is a
Honda or a Mercedes, the process of shoveling out will still make you
miserable. In the end, he argues, you would be happier spending the
extra money you would have blown on a fancier car hiring someone to
shovel your Ford Focus out of the snow.

Dunn and
Norton’s findings suggest that the guy down the street with the nicer
car is not, in all likelihood, happier than you. But what about Bill
Gates, or Richard Branson, or Thurston Howell III? Are wealthy people,
overall, happier?

Dunn points out that there are two kinds of
happiness: cognitive, evaluative happiness, which measures how satisfied
people are with life in general; and emotional happiness, which can be
measured by how frequently people smile, or how much fun they had that
day.

From an evaluative perspective, people generally think
they’re more important or satisfied with life if they make more money.
But in terms of emotional happiness, money contributes far less—and some
studies even suggest that, after a person hits the $75,000 mark, money
doesn’t really make much of a contribution to emotional happiness at
all.

There are exceptions, of course. A person making $20,000 per
year would see a significant change in lifestyle were that number to
increase by $10,000. However, that same amount of money would make far
less of a difference to a person making $200,000 per year.

“We don’t ever seem to learn that when we’re up at a million, the extra $10,000 doesn’t do much,” Norton says.